Exhibit 3
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REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November
1, 2000, is entered into by and between PSINet INC., a New York corporation
("PSINet"), and XPEDIOR INCORPORATED, a Delaware corporation ("Xpedior").
Capitalized terms used in this Agreement and not defined in context shall have
the meanings ascribed to them in Section 5(h).
WHEREAS, this Agreement is made pursuant to the Stock Purchase Agreement,
dated as of November 1, 2000, by and between PSINet and Xpedior (the "Purchase
Agreement");
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. Demand Shelf Registration.
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(a) Subject to Section 2(f), from time to time, on or prior to the 60th
day (or, if such date is not a Trading Day, the next Trading Day following such
60th day) (the "Filing Date") after the delivery to Xpedior by Holders of a
majority in interest of the Registrable Securities of a notice (the "Demand
Notice") demanding that Xpedior register such Holders' Registrable Securities,
Xpedior shall prepare and file with the SEC a "shelf" Registration Statement
covering all or any portion of the Registrable Securities for an offering to be
made on a continuous basis pursuant to Rule 415 under the Securities Act;
provided, however, that the Holders may only deliver three Demand Notices
pursuant to this Section 1. Such Registration Statement shall be on Form S-3 or,
if Xpedior is not then eligible to register the Registrable Securities for
resale on Form S-3, such Registration Statement shall be on another appropriate
form in accordance herewith, which form shall be reasonably acceptable to the
Holders. Subject to Section 2(f), Xpedior shall use its reasonable best efforts
to cause such Registration Statement to be declared effective under the
Securities Act within 120 days after the delivery of the applicable Demand
Notice, but in any event no later than the date which is the earlier of the
fifth day after (i) Xpedior is advised by the SEC that the SEC has no additional
comments to such Registration Statement, and (ii) Xpedior receives a "no review"
notice from the SEC (or, if such date is not a Trading Day, the next Trading Day
following such date) (in each case, the "Effectiveness Date"), and to keep such
Registration Statement continuously effective under the Securities Act until the
date which is two years after the applicable Effectiveness Date or such earlier
date when all Registrable Securities covered by such Registration Statement have
been sold or may be sold without volume restrictions pursuant to Rule 144 under
the Securities Act, as determined by counsel to Xpedior (in each case, the
"Effectiveness Period"). If an additional Registration Statement is required to
be filed because the actual number of shares of Common Stock into which the
Series B Preferred Stock is convertible exceeds the number of shares of Common
Stock initially registered in respect of the Series B Preferred Stock, subject
to Section 2(f) Xpedior shall have 30 Trading Days to file such additional
Registration Statement. Once the
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third Registration Statement filed pursuant to this Section 1(a) is declared
effective by the SEC, the Holders of the Series B Preferred Stock shall not have
the right to make any additional demands for registration under this Section
1(a), other than demands to register additional shares of Common Stock in the
circumstances set forth in the preceding sentence.
(b) If the Holders of a majority of the Registrable Securities so
elect, an offering of Registrable Securities pursuant to a Registration
Statement may be effected in the form of an Underwritten Offering, certain costs
and expenses of which will be paid in accordance with Section 3(b), provided
that a managing underwriter is selected pursuant to Section 1(c). Xpedior shall
not be required to effect more than three Underwritten Offerings under this
Agreement and shall not be required to effect an Underwritten Offering unless at
the time of a written request of the Holders electing an Underwritten Offering
the average daily trading volume of the Common Stock on the Nasdaq National
Market (or such other market or quotation system on which Xpedior's Common Stock
is then quoted or listed) during the period of 60 days immediately prior to such
request shall be less than 50,000 shares (subject to adjustment for stock
splits, reverse stock splits, recapitalizations and similar events). In such
event, and if the managing underwriter advises Xpedior and such Holders in
writing that in its opinion the amount of Registrable Securities proposed to be
sold in such Underwritten Offering exceeds the amount of Registrable Securities
which can be sold in such Underwritten Offering, there shall be included in such
Underwritten Offering only the amount of such Registrable Securities which in
the opinion of such managing underwriter can be sold, and such amount shall be
allocated pro rata among the Holders proposing to sell Registrable Securities in
such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the managing underwriter that will administer such
offering (which managing underwriter shall be of national standing and
reputation) shall be selected by the participating Holders with the consent of
Xpedior, which consent shall not be unreasonably withheld, delayed or
conditioned. No Holder may participate in any Underwritten Offering hereunder
unless such Person (i) agrees to sell its Registrable Securities on the basis
provided in any underwriting agreements described in Section 2(a)(xii), and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements. No Holder may participate in any registration hereunder unless
such Holder executes and delivers an agreement not to divulge any proprietary or
confidential information of Xpedior or any of its subsidiaries which becomes
known to such Holder in connection with any such registration.
2. Registration Procedures.
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(a) In connection with each of Xpedior's registration obligations
hereunder, Xpedior shall:
(i) Not less than seven Trading Days (or such longer period
as may be reasonably practicable) prior to the intended filing date of the
Registration Statement or any related Prospectus, or of any amendment or
supplement thereto (excluding any document that would be incorporated or deemed
to be incorporated therein by reference), Xpedior shall (A) furnish to the
Holders, any one firm of counsel to the Holders (their "Special Counsel") and
any
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managing underwriter copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) shall be subject to the review of such Holders, their Special Counsel
and such managing underwriter, and (B) cause its officers, directors, counsel
and independent certified public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to such
Holders and any managing underwriter, to conduct a reasonable investigation
within the meaning of the Securities Act. Xpedior shall not file any such
Registration Statement or any such Prospectus, or any amendments or supplements
thereto, to which the Holders of a majority of the Registrable Securities, their
Special Counsel or any managing underwriter shall reasonably object in writing
within four Trading Days of their receipt thereof, in which case Xpedior shall
revise such Registration Statement and Prospectus substantially in accordance
with the reasonable comments of the Holders of a majority of the Registrable
Securities, their Special Counsel or any managing underwriter until such Person
approves such Registration Statement and Prospectus for filing. If Xpedior is
unable to file such Registration Statement with the SEC by the Filing Date
solely because of the additional time necessary to address such comments, then
the Filing Date shall be extended by the amount of time reasonably necessary for
Xpedior to make the necessary revisions to such Registration Statement and
Prospectus in order to receive filing approval from such Person.
(ii) (A) Prepare and file with the SEC such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep such Registration Statement continuously effective as to the
Registrable Securities throughout the applicable Effectiveness Period, (B) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424
under the Securities Act, (C) respond as promptly as practicable to any comments
received from the SEC with respect to the Registration Statement, the Prospectus
or any amendment thereto and promptly provide the Holders true and complete
copies of all correspondence from and to the SEC relating to the Registration
Statement and the Prospectus, and (D) comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement, as so amended or
supplemented.
(iii) Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriter as promptly as
practicable (and, in the case of (A)(I) below, not less than three days prior to
such filing) and, if requested by any such Person, confirm such notice in
writing no later than two Trading Days following the day, (A)(I) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed, (II) when the SEC notifies
Xpedior whether there will be a "review" of such Registration Statement and
whenever the SEC comments in writing on such Registration Statement, and (III)
with respect to the Registration Statement or any post-effective amendment, when
the same has become effective, (B) of any request by the SEC or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information, (C) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose, (D) of the receipt by Xpedior of
any notification with respect to the suspension of the qualification or
exemption from
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qualification of any of the Registrable Securities for sale in any jurisdiction,
or the initiation or threatening of any Proceeding for such purpose, and (E) of
the occurrence of any event that could reasonably be expected to make any
statement made in the Registration Statement or Prospectus, or in any document
incorporated or deemed to be incorporated therein by reference, untrue in any
material respect or that requires any revisions to the Registration Statement,
Prospectus or other documents such that, in the case of the Registration
Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that Xpedior shall not be required to provide the Holders with the details of
any such event if Section 2(f) shall be applicable to such event.
(iv) Use its reasonable best efforts to avoid the issuance
of, or, if issued, obtain the withdrawal of, (A) any order suspending the
effectiveness of the Registration Statement, or (B) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, as soon as reasonably practicable.
(v) If requested by any managing underwriter or by Holders of
a majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (A) promptly incorporate into a Prospectus
supplement or post-effective amendment to the Registration Statement such
information concerning the manner of distribution of Registrable Securities as
such managing underwriter and such Holders reasonably agree should be included
therein, and (B) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after Xpedior has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that Xpedior shall not be required
to take any action pursuant to this Section 2(a)(v) that would, in the opinion
of counsel for Xpedior, violate applicable law or be materially detrimental to
the business prospects of Xpedior.
(vi) Furnish to each Holder, their Special Counsel and any
managing underwriter, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits thereto, to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the SEC.
(vii) Promptly deliver to each Holder, their Special Counsel
and any underwriters, without charge, as many copies of the Prospectus
(including each form of prospectus), and each amendment or supplement thereto,
as such Persons may reasonably request; and Xpedior hereby consents to the use
of such Prospectuses and each amendment or supplement thereto by each of the
selling Holders and any underwriters in connection with the offering and sale of
the Registrable Securities covered by such Prospectuses and any amendment or
supplement thereto.
(viii) Prior to any public offering of Registrable
Securities, (A) use its reasonable best efforts to register or qualify, or
cooperate with the selling Holders, any underwriters and their Special Counsel
in connection with the registration or qualification (or
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exemption from such registration or qualification) of, such Registrable
Securities for offer and sale under the securities or "Blue Sky" laws of such
jurisdictions within the United States as any Holder or underwriter requests in
writing, (B) keep each such registration or qualification (or exemption
therefrom) continuously effective throughout the applicable Effectiveness
Period, and (C) do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement; provided, however, that Xpedior shall not
be required to (X) qualify generally to do business in any jurisdiction where it
is not then so qualified, (Y) take any action that would subject it to general
service of process in any jurisdiction where it is not then so subject, or (Z)
subject Xpedior to any material tax in any jurisdiction where it is not then so
subject.
(ix) Cooperate with the Holders and any managing underwriter
to facilitate the timely preparation and delivery of certificates representing
the Registrable Securities to be sold pursuant to a Registration Statement,
which certificates shall be free, to the extent permitted by applicable law, of
all restrictive legends, and to enable such Registrable Securities to be in such
denominations, and registered in such names, as any such managing underwriter or
Holders may request at least two Trading Days prior to any sale of Registrable
Securities.
(x) Upon the occurrence of any event contemplated by Section
2(a)(iii)(E), except as contemplated by Section 2(f), as promptly as reasonably
practicable, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required documents such that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(xi) (A) On or prior to the Filing Date, prepare and file
with the Nasdaq National Market (and any other securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which shares of
Common Stock are listed or quoted) an additional shares listing application
covering the maximum number of shares of Common Stock issuable in payment of
dividends upon, or upon conversion of, the Series B Preferred Stock (assuming
all dividends are paid in shares of Common Stock ), (B) use its reasonable best
efforts to cause such shares of Common Stock to be approved for listing on the
Nasdaq National Market (and any other securities exchange, quotation system,
market or over-the-counter bulletin board, if any, on which shares of Common
Stock are listed or quoted) on or before the applicable Effectiveness Date,
including preparing and filing any amendments, supplements or exhibits thereto,
(C) promptly provide to the Holders evidence of such listing(s), (D) use its
reasonable best efforts to keep such listing(s) continuously effective
throughout the applicable Effectiveness Period, and (E) if at any time during
the applicable Effectiveness Period the number of shares of Common Stock
issuable in payment of dividends upon, or upon conversion of, the Series B
Preferred Stock shall be greater than the number of shares listed pursuant to
clause (A) above, promptly file one or more additional shares listing
applications, and promptly take such other actions, such that the number of
shares so issuable shall equal or exceed the number of shares so listed.
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(xii) Enter into such agreements (including, if applicable,
an underwriting agreement in form, scope and substance as is customary in
underwritten offerings) and take all such other actions in connection therewith
(including those reasonably requested by any managing underwriter and the
Holders of a majority in interest of the Registrable Securities being sold) in
order to expedite or facilitate the disposition of such Registrable Securities,
and whether or not an underwriting agreement is entered into, (A) make such
representations and warranties to such Holders as may be deemed to be
underwriters for purposes of Section 2(a)(11) of the Securities Act ("Requesting
Holders") and any underwriters as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
reasonably requested, (B) immediately prior to the effectiveness of the
Registration Statement and, in the case of an Underwritten Offering, at the time
of delivery of any Registrable Securities sold pursuant thereto, obtain and
deliver copies of opinions of counsel to Xpedior (and updates thereof) addressed
to such Requesting Holders and the managing underwriter, if any, in form, scope
and substance reasonably satisfactory to any such managing underwriter and
Special Counsel to such Requesting Holders covering the matters customarily
covered in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Special Counsel and managing underwriter,
(C) immediately prior to the effectiveness of the Registration Statement, and,
in the case of an Underwritten Offering, at the time of delivery of any
Registrable Securities sold pursuant thereto, obtain and deliver copies to such
Holders and the managing underwriter, if any, of "comfort" letters (and updates
thereof) from the independent certified public accountants of Xpedior (and, if
necessary, any other independent certified public accountants of any Subsidiary
of Xpedior or of any business acquired by Xpedior for which financial statements
and financial data is, or is required to be, included in the Registration
Statement), addressed to each such Requesting Holder and each underwriter, if
any, in form and substance as are customary in connection with underwritten
offerings, (D) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
selling Holders and the underwriters, if any, than those set forth in Section 4
(or such other provisions and procedures acceptable to Xpedior, the managing
underwriter, if any, and Holders of a majority in interest of the Registrable
Securities participating in such Underwritten Offering), and (E) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority in interest of the Registrable Securities being sold by such Requesting
Holders, their Special Counsel and any managing underwriter to evidence the
continued validity of the representations and warranties made pursuant to clause
(A) above and to evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by Xpedior.
(xiii) Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities and any attorney or accountant retained by
such selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of Xpedior and its Subsidiaries, and cause the
officers, directors, agents and employees of Xpedior and its Subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that such records, documents,
properties and information requested to be inspected or supplied are of the kind
reasonably necessary to be inspected or obtained by the selling Holders in
connection with the disposition of the Registrable Securities; provided further,
however, that such persons
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shall agree to keep confidential all information that is determined in good
faith by Xpedior in writing to be of a confidential nature at the time of
delivery of such information, unless (A) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (B) disclosure of such information, in the
reasonable opinion of counsel to such Person, is required by law, (C) such
information becomes generally available to the public other than as a result of
a disclosure or failure to safeguard by such Person, or (D) such information
becomes available to such Person from a source other than Xpedior and such
source is not known by such Person to be bound by a confidentiality agreement
with Xpedior.
(xiv) Comply with all applicable rules and regulations of the
SEC and make generally available to its security holders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder not later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) (A) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering, and (B) if not sold to underwriters in an
Underwritten Offering, commencing on the first day of the first fiscal quarter
of Xpedior after the effective date of the Registration Statement, which
statement shall cover said 12-month period or such shorter period as is
consistent with the requirements of Rule 158.
(b) Xpedior may require each selling Holder to furnish to Xpedior
such information, including information regarding the distribution of such
Registrable Securities, as is required by law to be disclosed in the
Registration Statement, and Xpedior may exclude from such registration the
Registrable Securities of any such Holder who fails to furnish such information
within a reasonable time after receiving such request. The failure by Xpedior to
file the Registration Statement by the Filing Date, to cause it to become
effective by the applicable Effectiveness Date or to maintain its effectiveness
for the applicable Effectiveness Period, if due to the breach of a Holder's
obligations under this Section 2(b), shall not be deemed a breach of Xpedior's
obligations under this Agreement or the Purchase Agreement with respect to such
Holder; provided, however, that Xpedior's obligations to Holders that timely
furnish such information shall remain in full force and effect.
(c) If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of Xpedior, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
(d) Each Holder agrees by its acquisition of such Registrable
Securities that it will (i) not sell any Registrable Securities under the
Registration Statement until it has received copies of the Prospectus as then
amended or supplemented as contemplated in Section 2(a)(vii), and notice from
Xpedior that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 2(a)(iii), and (ii)
comply with the prospectus delivery requirements of the Securities Act as
applicable to such Holder in connection with sales of Registrable Securities
pursuant to the Registration Statement.
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(e) Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of written notice from Xpedior of the occurrence
of any event of the kind described in Section 2(a)(iii)(B) through (E), such
Holder shall forthwith discontinue disposition of such Registrable Securities
under the Registration Statement until such Holder (i) has received the copies
of the supplemented Prospectus and amended Registration Statement contemplated
by Section 2(a)(x), or (ii) has been advised in writing by Xpedior that the use
of the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such Prospectus or Registration Statement.
(f) If (i) there is material non-public information regarding
Xpedior which Xpedior's senior management or Board of Directors reasonably
determines not to be in Xpedior's best interest to disclose, and which Xpedior
is not otherwise required to disclose, or (ii) there is a significant business
opportunity or event (including, but not limited to, the acquisition or
disposition of assets or any merger, consolidation, tender offer, joint venture,
strategic alliance or other similar transaction) available to Xpedior which
Xpedior's senior management or Board of Directors reasonably determines not to
be in Xpedior's best interest to disclose, then Xpedior may postpone or suspend
for any individual period of less than 30 days and aggregate periods not to
exceed 90 days in any calendar year filing of a Registration Statement,
Prospectus, prospectus supplement or any report, form or statement incorporated
by reference or to be incorporated by reference into any of the foregoing, or
any amendment to any of the foregoing, and suspension of offers and sales
pursuant to the foregoing, and, upon delivery of written notice from Xpedior of
any such postponement or suspension, Holders shall cease and be prohibited from
making any offers or sales of Registrable Securities pursuant thereto. The
Holders shall keep confidential and not use for any purpose such written notice
and the contents thereof, and any related information, unless and until such
information has been disclosed publicly by Xpedior, except as required by law
(other than in order to permit offers and sales of securities of Xpedior by a
Holder during such time period) or otherwise agreed to in writing by Xpedior.
3. Registration Expenses.
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(a) All fees and expenses incident to the performance of or
compliance with this Agreement by Xpedior shall, except as and to the extent
specified in Section 3(b), be borne by Xpedior whether or not pursuant to an
Underwritten Offering, whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with the Nasdaq National Market and each other
securities exchange, quotation system, market or over-the-counter bulletin
board, if any, on which shares of Common Stock are required hereunder to be
listed or quoted, and (B) in compliance with state securities or "Blue Sky" laws
(including, without limitation, reasonable fees and disbursements of counsel for
the Holders in connection with Blue Sky qualifications of the Registrable
Securities, or exemptions from such qualification, and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriter, if any, or the Holders of a majority
in interest of the Registrable Securities may reasonably designate)), (ii)
printing expenses (including, without
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limitation, expenses of printing certificates for the Registrable Securities and
of printing Prospectuses, if the printing of Prospectuses is requested by the
managing underwriter, if any, or by the Holders of a majority in interest of the
Registrable Securities, included in the Registration Statement), (iii)
reasonable messenger, telephone, facsimile and delivery expenses, (iv)
reasonable fees and disbursements of counsel for Xpedior and one firm of Special
Counsel for the Holders, (v) Securities Act liability insurance, if Xpedior so
desires such insurance, and (vi) fees and expenses of all other Persons retained
by Xpedior in connection with the consummation of the transactions contemplated
by this Agreement. In addition, Xpedior shall be responsible for all of its
internal expenses incurred in connection with the consummation of the
transactions contemplated by this Agreement (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
(b) If the Holders request an Underwritten Offering pursuant to
the terms hereof, Xpedior shall be responsible for all costs, fees and expenses
incurred in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants.
4. Indemnification.
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(a) Indemnification by Xpedior. Xpedior shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents (including its Special Counsel and any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principals as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, reasonable costs of
preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus, or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except to the extent, but only to the
extent, that (i) such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to Xpedior by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder for
use in the Registration Statement, such Prospectus or such form of prospectus,
or in any amendment or supplement thereto (including, without limitation, any
information incorporated therein pursuant to Section 2(a)(v)), or (ii) such
Losses arise directly from the failure of a Holder to comply with the prospectus
delivery requirements applicable to it (provided that Xpedior has timely
prepared all necessary prospectus supplements or amendments and provided them to
the Holders or their representatives in
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accordance with the terms of this Agreement and otherwise done all things
required of it in this Agreement so as not to adversely affect the ability of
any Holder to timely comply with such Holder's delivery requirements). Xpedior
shall notify the Holders promptly of the institution, threat or assertion of any
Proceeding of which Xpedior is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless Xpedior, the directors, officers,
agents and employees of Xpedior, each Person who controls Xpedior (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses
arising (i) solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission is contained in any information furnished in
writing by such Holder to Xpedior expressly for use therein or to the extent
that such information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder for use in the Registration Statement, such Prospectus
or such form of prospectus, or (ii) directly from the failure of a Holder to
comply with the prospectus delivery requirements applicable to it (provided that
Xpedior has timely prepared all necessary prospectus supplements or amendments
and provided them to the Holders or their representatives in accordance with the
terms of this Agreement and otherwise done all things required of it in this
Agreement so as not to adversely affect the ability of any Holder to timely
comply with such Holder's delivery requirements); provided, however, that in no
event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the net proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings.
---------------------------------------
(i) If any Proceeding shall be brought or asserted against
any Person entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party shall promptly so notify the Person from whom indemnity is
sought (the "Indemnifying Party") in writing, and the Indemnifying Party shall
assume in the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses
reasonably incurred in connection with the defense thereof; provided, however,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
(ii) An Indemnified Party shall have the right to employ
separate counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless (A) the Indemnifying Party has agreed
in writing to pay such fees and expenses, (B) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to
<PAGE>
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employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding, or (C) the named parties to any such Proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
the Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party); provided,
however, that if more than one Indemnified Party is seeking indemnification with
respect to the same Proceeding, the Indemnifying Party shall not be required to
pay for more than one separate counsel for all such Indemnified Parties as a
group. The Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld, delayed or conditioned, effect any settlement of
any pending Proceeding in respect of which any Indemnified Party is a party.
(iii) All fees and expenses of the Indemnified Party
(including reasonable fees and expenses to the extent incurred in connection
with investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section 4) shall be paid to the Indemnified Party, as
incurred, within 20 Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, however, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution.
-------------
(i) If a claim for indemnification under Section 4(a) or (b)
is unavailable to an Indemnified Party because of a failure or refusal of a
court, arbitrator or governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and the Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 4(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or
<PAGE>
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expenses if the indemnification provided for in this Section 4 was available to
such party in accordance with its terms.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in Section 4(d)(i).
Notwithstanding the provisions of this Section 4(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount of net
proceeds actually received by such Holder, and no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(iii) The indemnity and contribution agreements contained in
this Section 4 are in addition to any liability that the Indemnifying Parties
may otherwise have to the Indemnified Parties.
5. General Provisions.
-------------------
(a) Granting of Other Rights Agreements. Xpedior shall not grant
any registration rights in respect of any shares of capital stock or other
securities of Xpedior unless such rights are on the same or less favorable terms
than those that are granted to the Holders under this Agreement; provided,
however, that the Holders hereby consent and agree that Xpedior may grant in
other agreements to other holders of securities of Xpedior registration rights
which rank ratably with the registration rights granted hereunder to the
Holders.
(b) Piggy-Back Registrations. If, at any time when there is not
an effective Registration Statement pursuant to this Agreement pertaining to all
of the Registrable Securities, Xpedior shall determine to prepare and file with
the SEC a registration statement relating to an offering for its own account for
cash or the account of others under the Securities Act of any of its common
stock, other than on Form S-4 or Form S-8 relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with any stock option or other employee
benefit plan, Xpedior shall send to each Holder of Registrable Securities
written notice of such determination and, if within 20 days after receipt of
such notice, any such Holder shall so request in writing, Xpedior shall include
in such registration statement all or any part of the Registrable Securities
such Holder requests to be registered; provided, however, that Xpedior shall not
be required to register any shares of Registrable Securities pursuant to this
paragraph that are eligible for sale pursuant to Rule 144(k) under the
Securities Act. If the total amount of securities, including Registrable
Securities, to be included in such registration statement exceeds the amount of
securities that the managing underwriter (or, if the offering is not being
underwritten, Xpedior's Board of Directors) determines, in its written opinion,
in good faith is compatible with the success of the offering, then the number of
shares that may be included in the registration statement shall be allocated as
follows: first, to Xpedior (or, if the offering is being made for the account of
Persons other than Xpedior and not in violation of any rights of the Holders
pursuant to this Agreement, to such Persons), second, to the Holders and any
holders of Parity Stock on a pro rata basis based on the total number of
Registrable Securities and Parity Stock held by such Persons, and third, to any
other Persons participating in such offering on a pro rata basis. No such
reduction shall reduce
<PAGE>
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the amount of Registrable Securities of the selling Holders included in the
registration below 15% of the total amount of securities included in such
registration, unless such Holders are afforded, at any time more than 120 days
after the effective date of such registration, the right to an additional demand
shelf registration pursuant to Section 1 hereof. In no event shall any shares of
any other selling stockholder be included in any registration of securities for
the account of Xpedior that would reduce the number of Registrable Securities
that may be included in such registration by the Holders. As a condition to
participation in any such underwritten offering, each Holder shall enter into
such underwriting, lock-up and other agreements, and execute such other
instruments, as is customary in an underwritten offering. As a condition to
participation in any such non-underwritten offering, each Holder shall cooperate
to provide such information necessary for the preparation of the Registration
Statement as is customary in a non-underwritten offering.
(c) Notices. All notices or other communications under this
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy (with
confirmation of receipt), or by registered or certified mail, postage prepaid,
return receipt requested, addressed in accordance with Section 6.2 of the
Purchase Agreement.
(d) Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. Accordingly, the parties further agree that each party shall
be entitled to an injunction or restraining order to prevent breaches of this
Agreement, and to enforce specifically the terms and provisions hereof and
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other right or remedy to which such party may be
entitled under this Agreement, at law or in equity.
(e) Assignment; Parties in Interest. The rights of each Holder
hereunder, including the right to have Xpedior register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Holder, to any permitted assignee or transferee
of all or a portion of the Registrable Securities if (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to Xpedior within a reasonable time after such
assignment, (ii) Xpedior is, within a reasonable time after such transfer or
assignment, furnished with written notice of (A) the name and address of such
transferee or assignee, and (B) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, and (iv) at or before the time Xpedior receives the
written notice contemplated by clause (ii) of this Section 5(e), the transferee
or assignee agrees in writing with Xpedior to be bound by all of the provisions
of this Agreement. The rights to assignment shall apply to the Holder and to
subsequent permitted successors and assigns. Subject to the foregoing, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto and the Indemnified Parties, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement,
including any third party beneficiary rights.
<PAGE>
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(f) Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware (without giving effect to the
provisions thereof relating to conflicts of law). The nonexclusive venue for the
adjudication of any dispute or proceeding arising out of this Agreement or the
performance hereof shall be the courts located in Newcastle County, Delaware,
and the parties hereto and their Affiliates each consents to and hereby submits
to the jurisdiction of any court located in Newcastle County, Delaware or any
Federal courts located in Delaware.
(g) Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
(h) Certain Definitions. As used in this Agreement:
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person; for purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Common Stock" means Xpedior's common stock, par value $.01
per share.
"Demand Notice" has the meaning set forth in Section 1(a).
"Effectiveness Date" has the meaning set forth in Section
1(a).
"Effectiveness Period" has the meaning set forth in Section
1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" has the meaning set forth in Section 1(a).
"Holder" or "Holders" means any record holder of Series B
Preferred Stock or of Common Stock issued in payment of dividends upon, or upon
conversion of, Series B Preferred Stock who is a party to this Agreement or is
otherwise entitled to the benefits of this Agreement. When this Agreement
specifies a percentage, number or proportion of the Registrable Securities
required to take some action, each Holder of Series B Preferred Stock, as such,
shall be deemed to be a Holder of the number of shares of Common Stock into
which such Series B Preferred Stock is convertible.
"Indemnified Party" has the meaning set forth in Section 4(c).
"Indemnifying Party" has the meaning set forth in Section
4(c).
<PAGE>
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"Losses" has the meaning set forth in Section 4(a).
"Original Issue Date" has the meaning set forth in Xpedior's
Certificate of Designations to be filed with the Delaware Secretary of State
with respect to the Series B Preferred Stock.
"Parity Stock" means any capital stock of Xpedior that ranks
on parity with the Series B Preferred Stock as to redemption, conversion, the
payment of dividends or distribution of assets upon a liquidation, dissolution
or winding up of Xpedior, including without limitation Xpedior's Series A 8 1/2%
Cumulative Convertible Preferred Stock.
"Person" shall include individuals, corporations,
partnerships, limited liability companies, trusts, other entities and groups
(which term shall include a "group" as such term is defined in Section 13(d)(3)
of the Exchange Act).
"Proceeding" means any action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus or prospectuses included in
the Registration Statement (including, without limitation, a prospectus that
includes any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus (including pre- and post-effective amendments),
all exhibits thereto and all material incorporated by reference or deemed to be
incorporated by reference into such prospectus.
"PSINet" has the meaning set forth in the preamble to this
Agreement.
"Purchase Agreement" has the meaning set forth in the recitals
to this Agreement.
"Registrable Securities" at any time means (i) the shares of
Common Stock issued in payment of dividends upon, or upon conversion of, Series
B Preferred Stock, provided such shares are held by a Holder, and (ii) the
shares of Common Stock that are issuable at that time in payment of declared but
unpaid dividends upon, or upon conversion of, Series B Preferred Stock by a
Holder thereof (regardless of whether a conversion notice has been given).
"Registration Statement" means the registration statement or
statements contemplated by Section 1(a), including (in each case) the
Prospectus, amendments and supplements to such registration statement or
statements or Prospectus (including pre- and post-effective amendments), all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference into such registration statement or statements.
"Requesting Holder" or "Requesting Holders" has the meaning
set forth in Section 2(a)(xii).
<PAGE>
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Preferred Stock" means Xpedior's Series B 9%
Cumulative Convertible Preferred Stock, par value $.01 per share.
"Special Counsel" has the meaning set forth in Section 2(a).
"Subsidiary" or "Subsidiaries" means, with respect to PSINet,
Xpedior or any other Person, any corporation, partnership, joint venture or
other legal entity of which PSINet, Xpedior or such other Person, as the case
may be (either alone or through or together with any other Subsidiary), owns,
directly or indirectly, stock or other equity interests the holders of which are
generally entitled to more than 50% of the vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
"Trading Day" means (i) a day on which the Common Stock is
traded on the Nasdaq National Market or other national securities exchange or
quotation system on which the Common Stock is then listed or quoted, (ii) if the
Common Stock is not listed or quoted on the Nasdaq National Market or any other
national securities exchange or quotation system, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (iii) if the Common Stock is not quoted on the OTC Bulletin Board, a
day on which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding to its functions of reporting prices).
"Underwritten Offering" means an offering in which Registrable
Securities are sold to one or more underwriters for resale to the public
pursuant to an effective Registration Statement, provided that the managing
underwriter executes and delivers to Xpedior a confidentiality agreement in form
and substance reasonably satisfactory to Xpedior.
"Xpedior" has the meaning set forth in the preamble to this
Agreement.
(i) Counterparts. This Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
(j) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economics or legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to either party. Upon determination that any term or other
provision hereof is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
(k) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or
<PAGE>
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consents to departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by Xpedior and the Holders of at least
two-thirds in interest of the then outstanding Registrable Securities; provided,
however, that, for the purposes of this sentence, Registrable Securities that
are owned, directly or indirectly, by Xpedior or a controlled Affiliate of
Xpedior shall not be deemed to be outstanding. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of certain Holders, and that does not
directly or indirectly affect the rights of other Holders, may be given by
Holders of at least a majority in interest of the Registrable Securities to
which such waiver or consent relates; provided, however, that the provisions of
this sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.
(l) Shares Held by Xpedior and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by Xpedior or its
controlled Affiliates shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
(m) Rules of Construction.
----------------------
(i) References in this Agreement to any gender shall include
references to all genders. Unless the context otherwise requires, references in
the singular include references in the plural and vice versa. References to a
party to this Agreement or to other agreements described herein means those
Persons executing such agreements.
(ii) The words "include", "including" and "includes" shall
each be deemed to be followed by the phrase "without limitation" or the phrase
"but not limited to" in all places where such words appear in this Agreement.
The word "or" shall be deemed to be inclusive.
(iii) This Agreement is the joint drafting product of PSINet
and Xpedior, and each provision has been subject to negotiation and agreement
and shall not be construed for or against either party as drafter thereof.
<PAGE>
IN WITNESS WHEREOF, PSINet and Xpedior have caused this Agreement to be
signed by their respective officers thereunto duly authorized all as of the date
first written above.
PSINET INC.
By: /s/ Lawrence E. Hyatt
-----------------------------
Name: Lawrence E. Hyatt
Title: Executive Vice President
XPEDIOR INCORPORATED
By: /s/ J. Brian Farrar
-----------------------------
Name: J. Brian Farrar
Title: President
